Homework Answers
Variable cost associated with maintenance cost measures the change in maintenance cost due to change in quantity.
Let's say C is the maintenance cost , Q is quantity, b is variable cost
b = (change in C / change in Q)
At Q=13000, C = $70,000
At Q = 7000, C = $52,000
=> b = ($52000 - $70000) / (7000 - 13000)
=> b = (-$18000 / -6000)
=> b = $3
Hence, the variable cost associated with the firm's maintenance cost is $3 per unit.
Answer: Option (D)
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(15)
3000 units of product sold at price of $45 per unit.
Total sales = 3000 * 45
=> Total sales = $135,000
---
The variable cost is $25 per unit
=> Variable cost = $25 * 3000
=> Variable cost = $75,000
--
Total contribution margin = Total sales - Variable cost
=> Total contribution margin = $135,000 - $75,000
=> Total contribution margin = $60,000
Answer: Option (B)
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(16) Let's assume Q units are sold
Total revenue (TR) = Sales price * Quantity sold
=> TR= 40Q
---
Total variable cost (TVC ) = Variable cost per unit * Quantity sold
=>TVC = 20Q
---
Total fixed cost (TFC) = $7000
----
Total cost (TC) = TVC + TFC
=>TC = 7000 + 20Q
------------
At breakeven point; TR = TC
=> 40Q = 7000 + 20Q
=> 40Q - 20Q = 7000
=> 20Q = 7000
=> Q = (7000 / 20)
=> Q = 350
350 units should be sold to break even.
Answer: Option (D)
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